On July 15, over 35 million U.S. families received their first child tax credit payment. This payment is the first of six; families will receive these payments monthly. However, some families may choose to opt out of the remaining child tax credit payments; financial professionals assert that these families may want to wait and claim the whole credit when they file their 2021 taxes. If you’re a Texas resident and you need to learn more about IRS tax law as it relates to the child tax credit, read on.
Foregoing the child tax credit
Before tax law regulations allowed for the distribution of child tax credits, about 1 million families decided to forego the payments, which total a few hundred dollars a month. One research associate at Urban-Brookings Tax Policy Center states that it is important to give people the choice to opt out of the payments since different people budget their tax returns differently. Families can use the IRS online portable to pause the child tax credit payments up until Aug. 2, 2021.
Credit against IRS debt
The American Rescue Plan signed into law by President Biden in March includes the enhanced child tax credit. The credit was $2,000 in 2020 but increased to $3,000 for each child under the age of 17 and an additional $600 for children age 6 and younger. The amount can come as a monthly payment of $300 for children 6 and under or $250 for children ages 6 to 17, or families can claim the amount as a lump sum on their 2021 taxes according to IRS tax law.
Full credits are available to all children under the age of 17 in families with a 2020 or 2019 adjusted gross income of less than $150,000 for married couples filing jointly or $75,000 for single parents.